May 3 (SeeNews) - The European Commission said on Thursday it has kept its forecast for Montenegro's economic growth in 2018 at 3.0%, driven by construction and tourism.
Montenegro's economic growth forecast for 2019 has been lowered to 2.9% from 3.0% projected in November, the Commission said in its Spring 2018 Economic Forecast report.
The gradual completion of some important infrastructure projects, like the interconnection power cable with Italy and the first section of the Bar-Boljare highway as well as some large hotels, are expected to dampen investment as well as imports of material and construction equipment, the European Commission said. "At the same time, a new wind farm is expected to come into production in early 2019, further reducing energy imports. New investments in the aluminium industry could also help improving net exports performance in 2019."
The government announced fiscal measures for 2018 including an increase in VAT and excise rates and the introduction of excise duties on coal; these measures are to be followed by increases of fuel, tobacco and alcohol excises in 2019. Meanwhile, public sector wages and discretionary spending are expected to be contained. Therefore, the fiscal strategy is set to have an adverse impact on both private and public consumption, the Commission noted.
External imbalances are expected to remain high given the limited capacity of local companies to absorb both domestic and external demand. However, in addition to some improvement in the merchandise trade balance, both services and current transfers’ balances could support a narrowing of the current account deficit according
to preliminary data on tourism and remittances, the Commission said.
"Credit institutions’ liquidity remains high, reinforced by fast-growing bank deposits and improved financial stability indicators. Consequently, credit activity is expected to expand moderately and remain supportive of domestic demand during the forecast period, easing to some extent the negative impact of fiscal tightening on consumption."
Montenegro's main economic indicators outlook (pct change):
|
2017 |
2018 |
2019 |
GDP |
4.4 |
3.0 |
2.9 |
Private consumption |
4.2 |
2.2 |
2.5 |
Public consumption |
1.3 |
1.0 |
1.4 |
Gross fixed capital formation |
15.8 |
6.8 |
2.9 |
Unemployment rate (as % of total labour force) |
16.2 |
15.6 |
14.8 |